21 July 2014 Insurance

Hurricane Arthur losses set at $250m

Insured losses from Hurricane Arthur will not exceed $250 million from wind and coastal flooding, according to catastrophe risk management firm RMS.

Arthur made landfall at the southern end of North Carolina’s Outer Banks as a Category 2 hurricane. The hurricane passed quickly over the Outer Banks of North Carolina and weakened to a Category 1 hurricane before tracking offshore of Massachusetts on the night of July 4. Arthur made a second landfall as a post-tropical storm in the Canadian Province of Nova Scotia.

“Arthur is the first hurricane to make landfall in the U.S. since Hurricane Sandy in 2012. What is unusual about Arthur, particularly for this time of year, is that it rapidly deepened to become a category 2 hurricane,” said Brian Owens, senior director, business solutions at RMS. “It’s also rare for hurricanes to form in early July, which climatologically is the quietest time of the hurricane season.”

RMS said that inland flooding losses are expected to be a minimal proportion of the total insurance industry loss, as the areas affected are primarily residential.

“The losses will either be covered by the National Flood Insurance Program or will be excluded perils from many insurance policies. The RMS loss estimate does not include losses to the National Flood Insurance Program or inland flood loss. Post-event loss amplification is not expected to be a factor from Hurricane Arthur,” said RMS.

It also noted that approximately five percent of the estimated event loss is associated with coverage leakage. Coverage leakage is the escalation in claims severity for wind-only policies in circumstances where wind and water hazards coexist in residential lines of business.

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